The Centre is mulling introducing a new automotive policy for the $75 billion Indian automobile industry. Experts believe it would impact several auto majors in Asia’s third biggest economy.

Although the government is yet to come out with a comprehensive draft notification, auto honchos said the new automotive policy would be announced within eight weeks.

Some of the measures included would be to change the definition of the small car from the current sub-4 metre, which attracts 12 per cent excise duty, to tag other criterion like emission norms and safety standards.

The government is also mulling reduction of import tariff to bring down the cost of import of cars through the completely built unit (CBU) route and also put a cap on the royalty fees paid to multi-national auto firms for their technology and consultancy to incentivise growth of R&D centres within the country.

The inter-ministerial group (IMG), comprising of representatives from the PMO, department of industrial policy and promotion, road transport and environment ministry, has been constituted to fine tune the automotive proposals.
Automotive honchos said the government had announced the last automotive policy in 2002, which is 15 years old and the industry needs a fresh contemporary policy in tune with the latest development in technology and to protect the environment.

“Today it is more important to make a safe and good car to prevent fatal injuries and deaths due to accidents simply because the car was not safe,” Rajan Wadhera, president, automotive sector at Mahindra & Mahindra, India’s biggest utility vehicle maker by sales, told Financial Chronicle.

He said whether a car is sub-4 metre or not, an accident is an accident and there is no reason to lose precious lives.

“Seat belts and air bags are not enough, but the front, the rear and sides of the car should be made of good solid material even if we have to pay a little extra for safety,” Wadhera pointed out, saying with such a new definition, Indian cars could be exported overseas, including to European markets.

But he said lowering import tariffs would `kill’ local automobile industry while welcoming a cap on royalty fees paid to multinational auto firms.

“Tonnes of money goes out of India every year for technology and other things and I wonder why a company has not developed its own cars through its own R&D Centre even after 25 years in the business,” Wadhera said.

Jnaneswar Sen, senior vice president, marketing and sales at Honda Cars India, said today’s engine size and length of the car is not important, but its safety, not just for the occupants but also for the pedestrians, its fuel efficiency and environment friendly virtues are.

“The government move is to align with global standards and make India an export hub,” he said, adding that the economies of scale would reduce the price of the cars eventually in the local market.

N Raja, director & senior vice president, sales & marketing at Toyota Kirloskar Motor told Financial Chronicle: “The automotive sector in India is not only competitive, but also very advanced due to discerning customer preferences and progressive up gradation of regulations by the government.”

This has led to the various OEMs offering latest technology and also development of a good ecosystem of vendors in the country, he said. “Being a global MNC, we have always been at the frontier of offering world class technologies, which are available with us for the benefit of Indian customers. This has always helped the country accelerate on the path of technology up gradation in the automotive domain,” Raja pointed out.

On the royalty cap, he said the Japanese brand has been doing business in India as an Indian company and followed all the laws of the land as applicable. “Thus, we do not see a reason why we should be discriminated from any other company in India,” Raja said.

Sugato Sen, deputy director general of trade lobby Society of Indian Automobile Manufacturers or Siam, told this paper: “All that we know is that the government has appointed a consultant group to come out with a draft policy after a gap of 15 years. We do not know the detail contours of this policy.”